Accounts receivable are amounts owed to the business from customers. Credit is extended by the owner to entice the sale of the product or service provided. Customers typically have 30 days to pay the amount due. Some customers are extended additional time to pay based on their history etc.
Accounting uses control accounts to sum up activity related to a particular function of business. As an example the bank account has a register which identifies the activity in a ledger format of what transpires at the bank for this particular account.
Current assets carry the most value to the small business entrepreneur because of the cash conversion aspect.
Creating a file structure for accounting is critical for the overall success of the business. If properly structured, data retrieval and information access add to the overall value of the company. This article teaches the new business owner how to create a file structure to use with accounting.
The primary goal of creating a file structure is to make data retrieval easy and understandable by just about anyone involved in office operations. Keep in mind that the end user is how the structure is developed. From a simple format to a more complicated structure incorporating the entire office, the file structure should be organized in a systematic approach. First, break down the accounting function into the respective areas of importance. Next, subdivide these areas by accounting cycles. Finally, incorporate the accounting software function and the overall office to end up with a well-organized file structure for the company.
In business, liquidity is defined as the period of time it takes to turn assets into cash. It takes 20 minutes to turn the balance in the checking account into cash. You head on down to the bank and present a check. You get cash. But most businesses run on just more than the cash in the bank account.
